Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

ILLEGAL MONEY LENDING – SPA AND MOT AS SECURITY FOR THE LOAN

I took a loan from Mr. X (who is not a licensed money lender). Mr. X asked me to execute a Sale and Purchase Agreement (“SPA”) and Memorandum of Transfer (“MOT”) of my property to him as security for repayment of the loan. Later, I discovered that my property was transferred to Mr. Y. Can I recover back my property and have it re-registered in my name?
Yes.

  • The SPA and MOT which was executed to facilitate for the property to be used as security for a loan is illegal.
  • SPA and MOT cannot be used as façade to a money lending transaction.
  • SPA and MOT as security to a jual janji transaction is not recognized by the National Land Code 1965 (“NLC 1965”).
  • It is sham agreement to cloak the true intention of the parties which is illegal. Therefore, the entire transaction in the SPA and MOT is void.

But the property has been transferred to Mr. Y who is not the money lender. Does he have a good title?
Depends.

  • Section 340(2)(c) of the NLC 1965 provides that the title or interest of a registered proprietor is indefeasible when it is “unlawfully acquired”. As such, the title to Mr. X is defeated.
  • If the property is transferred from Mr. X to Mr. Y, Mr. Y has to prove that he is a bona fide purchaser for valuable consideration. If he can do that, his title cannot be set aside. This is provided in Section 340(3) of the NLC 1965.
  • Remember, the burden of proof that he is a “bona fide purchaser with valuable consideration” is on Mr. Y.

What is a bona fide purchaser for valuable consideration?

  • Bona fide implies good faith, upright mental attitude and clear conscience of a person. It requires Mr. Y to show that he has exercise ordinary prudence of a reasonable man when acquiring the property. Good faith contemplates “honest effort” to ascertain the property he acquires is not tainted with an illegality, fraud or fraudulent design.
  • If the court is not satisfied with Mr. Y’s honest effort, it cannot be said he is a “bona fide purchaser”.
  • “Valuable consideration” requires proof of payment of the purchase price of the property. Bank record of payment is crucial to establish valuable consideration. Cash payments would raise doubt especially on the elements of good faith.

Case in point: Pannir Selvam a/l Sinnaiyah & Anor v Tan Chia Foo & Ors [2021] 7 MLJ 384. High Court (Johor Bahru) – Civil Suit no: JA-22NCvC-273-12 of 2017

Back to Latest Legal Updates

Sorotan Terkini

LEGAL UPDATES – THE SILENT CURVE: WHY MEDICAL PREMIUMS SUDDENLY SPIKE

Medical insurance premiums do not increase gradually. They rise exponentially. For many years, costs appear manageable, giving policyholders a false sense of stability. However, once the insured reaches their mid-60s, medical charges begin to accelerate sharply, and after age 70, they often outpace the premiums by several multiples.

This happens because medical insurance is funded from a finite pool of money – an investment “bucket” – while the medical rider functions like an engine that consumes more fuel as the insured ages. When the engine grows faster than the bucket can be replenished, depletion is inevitable. The result is sudden premium hikes, demands for top-ups, or policy lapse – not due to misconduct or missed payments, but due to the structural design of the product itself.

Read More »
8 Februari ,2026 Tiada Ulasan

THE ‘COVER UNTIL 99’ MYTH – WHY INSURANCE AGENTS GET IT WRONG

Consumers must stop relying on what insurance agents say and start reading what insurance policies actually provide. ‘Medical cover until 99’ does not mean guaranteed coverage at an affordable premium. In reality, medical insurance charges rise exponentially after age 70, often making the policy mathematically unsustainable. By the time policyholders realise this, they are told to top up tens of thousands of ringgit or lose coverage altogether.

Read More »
8 Februari ,2026 Tiada Ulasan

STRATA TITLES ACT – DEVELOPER MUST ACCOUNT FOR COMMON PROPERTY COMPENSATION: HIGH COURT IMPOSES CONSTRUCTIVE TRUST

In JMB Kelana Square v Perantara Properties Sdn Bhd & Ors [2025] 12 MLJ 51, the High Court held that a developer who received compensation for land compulsorily acquired for the LRT 3 project could not retain sums attributable to common property. Although the compensation was paid entirely to the developer as registered proprietor, the Court found that part of the acquired land constituted common property, and the developer therefore held RM6.05 million on constructive trust for the Joint Management Body. The decision affirms that JMBs have proprietary standing to recover compensation for common property and that courts will intervene to prevent unjust enrichment in strata developments.

Read More »
1 Februari ,2026 Tiada Ulasan

UNFAIR DISMISSAL – MEDICAL LEAVE IS NOT MISCONDUCT: HIGH COURT UPHOLDS INDUSTRIAL COURT’S PROTECTION OF SICK EMPLOYEE

In Aerodarat Services Sdn Bhd v Lawerance Raj a/l Arrulsamy & Anor [2025] 11 MLJ 26, the High Court dismissed an employer’s judicial review and affirmed that prolonged medical leave does not, by itself, amount to misconduct justifying dismissal. The Court held that the employer failed to prove the critical element of intention not to return to work or unwillingness to perform contractual duties, despite high absenteeism caused by serious illness and surgery. The ruling reinforces that employers must distinguish between genuine illness and misconduct, and cannot rely on medical absence alone to terminate employment.

Read More »
1 Februari ,2026 Tiada Ulasan

WILL AND PROBATE – COURT OF APPEAL INVALIDATES WILL OF 97-YEAR-OLD TESTATOR: CAPACITY, SUSPICION AND UNDUE INFLUENCE PROVED

In Kong Kin Lay & Ors v Kong Kin Siong & Ors [2025] 5 MLJ 891, the Court of Appeal set aside a will executed by a 97-year-old testator, holding that there was real doubt as to testamentary capacity, compounded by serious suspicious circumstances and undue influence by certain beneficiaries. The Court emphasised that while the “golden rule” is not a rule of law, failure to obtain medical confirmation of capacity where doubt exists is a grave omission. Credibility issues with the drafting solicitor, beneficiary involvement in the will’s preparation, and suppression of evidence led the Court to declare the will invalid and order intestacy.

Read More »
1 Februari ,2026 Tiada Ulasan

NOT AN ‘AGREEMENT TO AGREE’: ENGLISH COURT OF APPEAL SAVES LONG-TERM SUPPLY CONTRACT DESPITE OPEN PRICE CLAUSE

In KSY Juice Blends UK Ltd v Citrosuco GmbH [2025] 2 Lloyd’s Rep 581, the UK Court of Appeal held that a long-term supply contract was not unenforceable merely because part of the price was stated as “open price to be fixed”. The Court implied a term that, in the absence of agreement, the price would be a reasonable or market price, noting that the product’s value could be objectively benchmarked against the market price of frozen concentrated orange juice. Emphasising that courts should preserve commercial bargains rather than destroy them, the decision confirms that section 8(2) of the Sale of Goods Act 1979 operates as a saving provision, not a bar to enforceability.

Read More »
1 Februari ,2026 Tiada Ulasan
ms_MYMY
en_USEN zh_TWZH ms_MYMY